Can I avoid a Short sale of my home by turning my Heloc into a unsecured loan?

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My 1st mortgage is $ 169,000 my 2nd(heloc) is $ 82,000 total of 251K, current market in Fl. I may could get 220K for my home. To avoid short selling will the bank consider an unsecured loan for either the entire 2nd or the short amount 31k in this case? So i guess my question is do banks give unsecured credit up to 30k, my wife and i both have 700+ credit also

  1. Reply
    April 29, 2011 at 10:26 pm

    I doubt it.
    Eat ramen noodles 3 times a day if you have to, cancel cable, internet service and cell phones. Turn your thermostat up several degrees so your electric/gas bills go down.
    Sell those fancy cars you have & buy junkers instead. Consider sharing just 1 vehicle if feasible.
    These are all tips that will help you be able to make your mortgage payments until your house sells. You’d be surprised at how many HUNDREDS of dollars each month we waste on stupid things. Whatever you do, DO NOT pay late on your mortgage. That’s the fastest way to send your credit scores down the toilet.

  2. Reply
    April 29, 2011 at 10:38 pm

    What about refinancing options with your lender? Have you spoken to them? Communication with your lender is the first place to start. Discuss options. Is the reason for the short sale a short term situation or a more pervasive long term one?

  3. Reply
    April 29, 2011 at 11:02 pm

    Yes, but if you are having trouble paying your current debt at such a low interest rate, the bank would probably be able to figure that out when they look at your credit and debt to income ratio. However if you are able to make the payments and you have good credit I am sure the bank would be thrilled to replace that debt with a much higher rate. When I was a baker we would usually do unsecured credit up to 100k.

  4. Reply
    April 29, 2011 at 11:19 pm

    That’s an interesting question. I haven’t heard of that being done but I don’t see why it couldn’t work if the lender was amenable to it. It would probably depend upon whether the Heloc was kept in house by the lender or sold off to another entity. If it was kept in house then the lender would have the flexibility to convert the loan. The lender would be substituting the security they have with the home as collateral for an unsecured loan which they probably wouldn’t like but if the alternative is to get nothing out of the situation then they might do it.

    I would guess that the odds of it happening are fairly low but it’s definitely worth a try. Since you are in Florida, the sooner you find out the better as I don’t believe the real estate market there will come back any time soon. It’s also somewhat ironic that the mantra over the last five years has been to convert unsecured high interest debt into home equity debt at a lower rate. Obviously times have changed. Good Luck!

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